Tax day is Wednesday, April 15th, 2015, so hopefully you’ve already mailed the necessary forms to the IRS or filled them out online. If not, you still have time, but hurry! Now is the perfect time to get your taxes filed and organized with documents from previous years so that everything goes smoothly should you need to access them in the future. Having a systematic plan for organizing your taxes will ensure that you’ll be able to find the exact documents you need in the event you are audited, or move out of the country. Here are some helpful tips on how you can keep these important files neatly stowed away:
The rule of thumb is to save seven years’ worth of taxes in the event you are ever audited by the IRS; however, many accountants and financial advisors recommend that you save all of your taxes for every year of your life. Although you may not be audited for taxes filed a decade ago, this documentation might be needed if you ever decide to move out of the country, and it could also be used to settle your real estate in the event of your death. In any event, it’s better to be safe than sorry.
Organize by Year
While saving all that paperwork could prevent major headaches in the future, it could also cause them if not properly organized. The key to tax filing success is to make all of your paperwork as easily accessible as possible. Begin by sorting all of the paperwork for each year in a separate folder and labeling the folder with the appropriate year. This way, you will be able to tab through your folders and find the exact year you need with minimal effort. To save space in your file drawer, you may want to group some years together in one folder. This is okay to do for taxes that are more than seven years old, since you are unlikely to need to locate any specific documentation from that long ago. More recent years, however, should be designated their own folders.
Keep it Safe
For additional protection, we recommend keeping your taxes, along with other important paperwork such as your birth certificate and social security card, in a fireproof filing cabinet. This will ensure that these documents are protected in the event of an unexpected disaster, as fireproof files can save documents from fire damage, water damage and theft.
Back it Up
Although the best practice is to keep original hard copies of your taxes, saving electronic versions is always a good idea too. You can scan your tax documents and email them as PDF files to yourself to ensure that you will still have access to them in the event that you lose your physical copies.
Keeping your taxes well organized, protected and backed up in digital format will make the paperwork easy to find in a pinch, if the need should ever arise. Whether you own a large company, a small business or you work on a freelance basis, the organizational habits you create now will make for a much better work environment in the future.